Question
Vick incorporated sold bonds on January 1, 2005. The bonds were 15-year bonds with a 4 % coupon. The market rate of interest was 5
Vick incorporated sold bonds on January 1, 2005. The bonds were 15-year bonds with a 4 % coupon. The market rate of interest was 5 percent.
The terminal value of the bond is 1000.
1. What was the price of the bonds?
2. What was the interest expense for the first two years?
3. On January 1, 2007 (after two years) the market rate of interest was now 3 percent. What would be the price of the bonds now?
4. If Vick were to buy back the bonds at this time, what would be the gain or loss?
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Face Value of Bond 1000 Coupon Rate 4 Market Interest Rate 5 Interest Payment per year 40 Answer to 1 Calculation of Price of Bond on January 1 2005 C...
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
